In California, and many other states, earthquake is an excluded covered cause of loss from most property insurance policies. The reasoning behind this is because predicting earthquakes it’s not yet possible, and for insurance to work, predictability of losses is necessary to determine rates.
In California, your homeowners insurance carrier must provide an offer or earthquake insurance at every other renewal. So even though your insurance company may not provide earthquake insurance coverage, they provide the offer from the California earthquake Authority or CEA. The CEA is the largest provider of earthquake insurance in the U.S. and has more than 1 million policies in force. It has a claims paying ability of $17 Billion according to their publications. 
Earthquake insurance policies work differently than traditional property or fire insurance policies in that the deductible is based on a percentage of the policy limit as opposed to a flat amount like $500 or $1000 on your homeowners policy. For CEA policies, the deductible range is 5-25%, and depending on the level you choose, the premium will adjust accordingly. If the Dwelling replacement coverage on your policy is $500,000, and the earthquake insurance deductible is 10%, then your deductible will be $50,000. This means that an $80,000 loss to your dwelling would have a claim settlement of $30,000.
Coverage is available for personal property, loss of use, building code upgrade and more. As you may already know, Earthquake insurance policies are relatively expensive compared to homeowners insurance. The higher costs are generally due to the lack of predictability and the adverse selection that the insurance company receives when it comes to policyholders. This means that homeowners near fault zones, and areas where earthquakes have happened in the past, buy more policies that those who live in less active regions.
When looking at earthquake insurance at your next renewal, please take time to understand what the insurance company is offering and we will help you navigate the process.
